Q2 2024 Haleon PLC Earnings Call
Unknown Executive: Because here, when I exclude pain relief and respi from your Q2 or first half organic cell growth, I basically get 60% of your turnover growing in excess of 8% in the first six months of the year. So my question here is whether you've got a more favorable basis of comparison for both pain and respi in the second half. So A, do you expect both units to be back into positive organic cell growth territory from Q3?
In the release and recipe from your Q2, our first half organic sales growth.
Speaker Change: I basically get 60% of your turnover growing in excess of 8% in the first six months of the year.
Speaker Change: So my question here is you've got the most favorable basis of comparison for both pain and recipe in the second half. So a do you expect both units to be back into positive organic sales growth territory from Q3.
Unknown Executive: And assuming continued momentum for the remaining 60%, would it be fair to assume organic cell growth in the second half towards the top end of your 4% to 6% range? So any help on that would be great. Thank you.
Speaker Change: And assuming continued momentum for the remaining 60%.
Speaker Change: Would it be fair to assume a organic sales growth in the second half towards the top end of your 4% to 6% range. So any help on that would be great. Thank you.
Speaker Change: Yeah.
Unknown Executive: Thanks for the questions, Guillaume. Listen, I'll take the first question, and I'll pass it to Tobias for the second question.
Speaker Change: Thanks for the question listen I'll take the first question and then I'll pass it to be is for the second question. So in North America as we just said it again.
Unknown Executive: So in North America, just to get us grounded, we were down a little over 1% in the first half, but we saw 1% growth in Q2. You know, we saw the inventory reductions in Q1 that we had shared with everybody. And then obviously, in Q2, we made the decision to proactively take down inventory of our phenylephrine products ahead of the FDA decision. And just as a reminder, that decision is about efficacy, not safety, for phenylephrine, but we took that proactive approach.
Speaker Change: Get us grounded.
Speaker Change: We are down a little over 1% in the first half 1% growth in and Q2, we saw the inventory reduction in Q1 that we had shared with everybody and then obviously in Q2, we made the decision to proactively.
Speaker Change: Take down inventory of our phenylephrine product ahead of the.
Speaker Change: The FDA decision and just as a reminder that is about efficacy not safety.
Speaker Change: We took that that proactive approach and thats impacting obviously, the volume and the growth in the U S.
Unknown Executive: So that's impacting, obviously, the volume and the growth in the U.S. You're right. However, consumption has continued to be strong at mid-single digits ahead of the market. So we feel good about the underlying business and the fact that we're growing market share. So I would fully expect that in the back half, we'll see some of that net sales growth now coming through on the business as we have a lot of those changes kind of in the base with the inventory reductions and things like that. So overall, I think I'd leave it there. Tobias, on the second question. Yeah, so where do you have to go?
Speaker Change: Youre right consumption has continued to be strong at mid single digits ahead of the market. So we feel good about the underlying business and the fact that we're growing market share. So I would fully expect that in the back half we will see some of that net sales growth now coming through on the business.
Speaker Change: As we have a lot of those.
Speaker Change: Changes kind of in the base with the inventory reductions and things like that.
Speaker Change: So overall I think I'll leave it there to be on the second question, yes. So.
Tobias Hestler: Yeah, so look, before you have two organic cells grow, I mean, first of all, I mean, if you just look at the four to six guidance, it really implies five to nine in the second half. So I think, yes, it's clearly at the upper end of the range, at a minimum. And I think, look, we're not going to guide to individual categories for the second half of the year. But I mean, we'd expect that, you know, oral health and VMS continue to go strong. And of course, in oral care, we're still in a situation where all brands have been doing extremely well. That is, you know, not something you would expect in the very long run.
Speaker Change: I have two.
Speaker Change: <unk> sales growth.
Speaker Change: First of all I mean, if you just look at the 4% to six guidance I mean, it really implies five to nine in the second half. So I think yes, it's clearly.
Speaker Change: The upper upper end of the range as a minimum and I think look we're not going to guide to individual categories for the second half of the year Budd.
Budd: I mean, we would expect that oral health and Dms continued to go strong and of course of oral care. We're still in a situation that all brands have been doing extremely well.
Speaker Change: That is not.
Speaker Change: Not something you would go through the happened a very long run also denture care has done very very well.
Tobias Hestler: Also, denture care has done very, very well in half one. So, and also VMS has come back strongly, but also we're hitting a bit of a phase effect from last year as well. And absolutely. The big drainers on pain relief and pain management are behind us, plus a bit of the destocking.
Speaker Change: One.
Speaker Change: So and also Vms has come back.
Speaker Change: Strongly but there also were seeing a bit of a base effect from last year.
Speaker Change: Well and yes, absolutely the big the big trainers on pain relief and on.
Speaker Change: No pain relief are behind us plus a bit of the destocking as well that has happened in the half one them.
Brian McNamara: And just to follow up on North America, Brian, on the competitive environment and promotional intensity and how you're reacting to this. Yeah, no, thank you. I did.
Speaker Change: Thank you.
Speaker Change: Just to follow up on North America, Brian on the.
Speaker Change: Competitive environment and promotional intensity.
Speaker Change: How you are reacting to this.
Brian McNamara: Yeah, no, thanks, Guillaume. I did not answer your question on promotional intensity, so I apologize. Listen, we're in a bit of a less promotionally sensitive business in OTC, and in oral health, our strategy has always been lower promotion on our brands, where we invest heavily in A&P and heavily in the dental detailing piece. So we're not seeing anything in the categories we compete with that is radically different. Of course, every year there are ups and downs in promotional intensity and stuff, but there's nothing systemic happening in our categories worth noting.
Speaker Change: Yes, no. Thanks.
Speaker Change: I did not answer your question on promotional intensity. So apologize listen we were in a bit of a less promotional Lee sensitive business and OTC and oral health our strategy has always been.
Speaker Change: Lower promotion on our brands, where we invest heavily in A&P in heavily in the dental detailing piece. So we're not seeing anything in the categories. We compete with that is radically different of course every year, there's ups and downs and promotional intensity and stuff, but there's nothing systemic happening in our categories.
Speaker Change: Note it.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Operator: Our next question comes from Iain Simpson of Barclays. Iain, your line is now open.
Speaker Change: Our next question comes from Ian Simpson with Barclays and your line is now open.
Ian Simpson: Thank you. Thank you very much couple of questions for me if I can firstly just to make sure. We've got the magnitude if that phenylephrine swing right.
Iain Simpson: make sure we've got the magnitude of that phenylephrine swing right. Am I right in thinking that was a 40 BIP volume destock at group level in your Q2 and that all should reverse into Q3 so that sequentially you were down 40 in Q2, you're up 40 in Q3, so it's a sequential 80 BIP volume swing at group. Just want to make sure I've got the moving part on that right. And then secondly, your marginal profit guidance, given the strong H1 and given that you'll have, I presume, a tonne more volume leverage in the second half, implies, I guess, that A&P spending is going up quite a lot in the second half.
Ian Simpson: Am I right in thinking that was the 40 Bip volume D. Stoke at group level in your Q2 under that.
Paul: Should reverse into Q3 say that sequentially you were down 40, Q2, Europe 40, Q3, so it's a sequentially EBIT volume swing group just want to make sure I've got amazing Paul not right.
Speaker Change: And then secondly your.
Speaker Change: Just sort of marginal profit guidance, given the strong H, one and give them that youll have I presume a ton more volume leverage in the second half <unk>.
Speaker Change: Implies I guess the I M pay spending is going up quite a lot in the second half.
Speaker Change: I guess part of that is probably the Iraq sone launch, but anything else that we should kind of have an eye on in terms of why you might be spending money in the Ht. Thanks very much.
Iain Simpson: I guess part of that is probably the Aroxon launch, but anything else that we should kind of have an eye on in terms of where you might be spending money in H2? Thanks very much.
Okay. Thanks.
Unknown Executive: So yes, on PE, you got it right. So we said it's about a half a point impact for the group. It's about a two point impact on PE. And that is a swing.
Unknown Executive: Thanks, Ian. So I'll take both of those.
Speaker Change: Thanks, Ian So I'll take both of those so yes on P. You guys, Ryan, but we said there's about a half a point.
Speaker Change: Blackboard or the group its about a two point impact on <unk> and that is that that doesn't swing. So I think that as you got that you've got that correct.
Speaker Change: And then on off one off too.
Speaker Change: I mean, absolutely I mean first of all I want to say I'm really pleased with the performance the really positive that the model is delivering and then also I mean is the resolve really confident on our full year guidance then.
Unknown Executive: So I think you got that correct. And then on half one and half two. So I mean, absolutely.
Speaker Change: <unk> made a profit guidance we've upgraded us.
Speaker Change: Is almost two times the midpoint of the organic revenue guidance that we have given them. So now why is it lower in half two which is which is correct. So maybe one once that box. So when you look at last year last year half one was 9% up two was 12 so.
Recycling over a much stronger half two.
Unknown Executive: I mean, first of all, I want to say really pleased with the performance, really positive that the model is delivering. And then also, I mean, as a result, we're really confident in our full year guidance. And I mean, ultimately, the profit guidance we've upgraded is almost two times the midpoint of the organic revenue guidance that we have given them. So now, why is it lower in half, which is correct? So maybe we should take one step back.
Speaker Change: And then there's really four reasons why organic profit growth is going to be lower than the 11%. We've seen in half one and I think you already mentioned.
Ian Simpson: Two of them or one of them in your question Ian So I think the biggest foundry.
Ian Simpson: I'm going to do them order of sort of sizing and magnitude. The first reason, it's going to be lower is the phasing of the cost inflation cost inflation was really at its highest point in half one of last year and then we saw costs starting to come down in half two of last year and you saw that come through in our Q4 margins last year when gross margin started to grow.
Unknown Executive: So when you look at last year, last year, half one was nine, and half two was 12. So we're cycling over a much stronger half two from last year. And then there are really four reasons why organic profit growth is going to be lower than the 11% we've seen in half one. And I think you have already mentioned two of them or one of them in your question, Ian. So I think the biggest one really is, and I'm going to do them in order of sort of size and magnitude.
Ian Simpson: Then I head up the rate of sales growth. So one was really a low prior year gross profit comparator. So as we get into half two this year, we're going to start lapping the benefit of those lower lower costs and usually you have the normal time lag when the costs come in until they run through inventory.
Ian Simpson: To come to come out so that won't repeat in op. Two of this year than the second reason is the one you mentioned Ian So, yes, A&P growth will be higher in half two and it wasn't in half one and also here a reminder, last year A&P and hopped, who was on the outbound process. So and then in addition.
Ian Simpson: Fully support the launch of <unk>. In addition to continue investing.
Ian Simpson: And the brands that deliver on the growth of continued high and strong investment into the launches, we made especially clinical wide.
Ian Simpson: On <unk> and on the high growth drivers like sentiment plus all of the geographic expansion that is running the <unk>.
Speaker Change: <unk> is a bit of phasing mainly R&D you've seen R&D spend was only up low single digits in half one that is largely driven by project phasing, which is different so that's going to reverse out and significantly accelerated in the second half of the year and then.
Unknown Executive: So that's going to reverse out and significantly accelerate in the second half of the year. And then look, much smaller, but some other factors in half two that won't repeat. For example, we had an M3 tax credit in the US in Q3 last year. So that won't repeat. So those are the drivers. But look, overall, very pleased with the high single-digit guidance for the year and very confident in that one.
Speaker Change: And where is much smaller but some other factors in the op two that won't repeat for example.
Speaker Change: We had an employee tax credits in the U S. In Q3 last year, so that that won't repeat so so those are those are the drivers, but look overall very pleased with that high single digit guidance for the year and very confident in that one.
Speaker Change: Brendan Thank you very much.
Operator: Our next question comes from Bruno Monteyne of Bernstein. Bruno, your line is now open.
Speaker Change: Our next question comes from Bruno <unk> Bernstein.
Your line is open.
Bruno Monteyne: Thank you. So the first question is coming back on organic growth. If I understand you correctly, Tobias, I think you just said in the first question that organic growth should be at least at the minimum at the upper end of the four to six ranges, to make sure I understood that correctly. But then my real question is about the launch of the erectile dysfunction cream at the end of this year. If I remember from when you sort of IPO'd, you always said instead of launches, switches are above and beyond organic growth, but this launch should be the in-launching quarter for you, filling the channel with that.
Bruno: Thank you.
Speaker Change: The first question is coming back on the organic growth within the city correctly to buy as I think you just said on the first question. So the organic growth should be at least at a minimum at the upper end of the four to six range is making sure I understood. It correctly, but then my real question is about the launch with erectile dysfunction cream at the end of this year.
Speaker Change: If you remember from when you sort of IPO would you always said sort of launches switches are above and beyond organic growth.
Speaker Change: But these launches should be actually in August.
Speaker Change: During the quarter for the filling the channel over that.
Bruno Monteyne: Am I right that the kind of growth from that launch will therefore be above and beyond the usual guidance and wouldn't that flip you at the top end or actually over the 4% to 6% range? And the second one is just a question on behalf of Tom Sykes. On the China JV, I did notice that you are delaying it. You're sort of getting one year of extension before you do the new agreement. Is that because you can't really agree? Should we treat it as bad news that you said it was a bit of an issue and you weren't able to finish the discussions in time? Thank you.
Speaker Change: Right at the kind of growth from that launch will therefore be above and beyond the usual guidance wouldn't that flip you at the top end rashi over the over the fourth over the 4% to 6% range.
Speaker Change: And the second one is just a question on behalf of Tom Sykes on the China, JV I didn't notice that youre delaying it sort of getting one year of extension before you do the new agreement.
Speaker Change: Is that because you cant really agrees that should we see that there's bad news at these sort of visit that someone issue what enabled the things the discussions and fine. Thank you.
Speaker Change: Yeah.
Unknown Executive: Great. Thanks, Bruno. Listen, I'll take the Roxanne question and pass it to Beats on the chat.
Speaker Change: Great. Thanks, Bruno listen I'll take the <unk> question and pass it to be it's changed.
So first of all we are excited about.
The first erectile dysfunction.
This function OTC launch in the U S.
Unknown Executive: So first of all, we're excited about the first erectile dysfunction OTC launch in the US. We're excited about the opportunity there. We said we would launch at some point before the end of this year, so I wouldn't expect it to have a big impact, potentially, on this year's results.
Speaker Change: So we're excited about the opportunity there and we said we would launch at some point.
Unknown Executive: And we'll give guidance for next year when we get to next year, but if we think about that category, we think it has very strong potential. But it is a new category to the OTC market. It is a topical product versus a systemic product. And obviously, it's a direct to OTC, not an OTC switch. So Roxanne doesn't have any brand awareness.
Speaker Change: Before the end of this year, so I wouldn't expect it to have a big impact potentially on this year's results and as we and we will give guidance for next year when we get to next year, but if we think about that category. We think it has.
Speaker Change: Very strong potential, but it is a new OTC category. It is a it is a.
Speaker Change: Topical product versus systemic product and obviously, it's a direct to OTC not an OTC switch. So roxanne doesn't have any brand awareness. So I think it's got great potential it'll be a bit of a slower burn potentially because of some of those factors.
Tobias Hestler: So I think it's got great potential. It'll be a bit of a slower burn, potentially, because of some of those factors. But we're really happy to be at a point where we can announce it will launch before the end of the year and excited about the future potential. Tobias, do you want to touch on China? So on your first question, Bruno, second half growth, yes, I mean, the full year guidance of 4-6 for the full year implies 5-9.5 too.
Speaker Change: But we're really happy to be at a point, where we can announce that will launch before the end of the year and are excited about the future potential to.
Speaker Change: To be honest you want to touch on China. So.
Tobias Hestler: So I think the 5-9 puts you really squarely into the upper half of that, at the lower end of the upper half of our full year range. And then, and then, of course, above that, depending on where you put us in this 5-9 for the second half of the year with our full year guidance.
Speaker Change: On your first question Bruno second half growth, yes, I mean, the full year guidance of four to six portfolio.
Speaker Change: Two nine in half two so I think that five to nine puts you really.
Speaker Change: Two squarely into the upper half.
Speaker Change: Of that.
Speaker Change: At the lower end and the upper half of our full year range and then.
Speaker Change: And then of course, some above depending.
Speaker Change: Depending on where you put us in this five to nine for the second half of the year with a full year with our full year guidance and on the China JV.
Tobias Hestler: And on China, Jamie, we've extended it by nine months. So it was also expiring in September of this year. So we extended it to June. So that's a nine-month extension. I would call this more of a technical extension. And maybe give you the background as well.
Speaker Change: So we've extended it by by nine months so it was.
Speaker Change: Also.
Speaker Change: Expire in September of this year. So we've extended into June and Thats, a nine month extension I would call. This more of a technical extension, maybe give you the background as well so the joint venture is really the over the counter medicines part of.
Speaker Change: The business in China, which is about 40% of our Chinese.
Speaker Change: Business.
Speaker Change: And as a result of our health and via message fully outside that joint venture.
Tobias Hestler: So the joint venture is really the over-the-counter medicines part of the business in China, which is about 40% of our Chinese business. And, as a result of our health and VMS business, it's fully outside that joint venture. It's a complex joint venture with a number of partners. I mean, we own 55% of it. 25% are owned by a publicly listed entity, and 20% are owned by an entity that is owned by a private shareholder and two of the provincial governments.
Complex joint venture with the number of partners I mean, we own 55% in it.
Speaker Change: 25, then they're owned by a publicly listed entity, 20% are owned by by an entity that is owned by a private shareholder and two of the provincial governments the listed entity.
Tobias Hestler: The listed entity, the other entity is a majority shareholder of. So as a result, we have a number of parties involved in that. And on top of that, in the Chinese environment, including, of course, government partners as well.
Speaker Change: Yes, the entity as a majority shareholder of <unk> as a result, we have a number of parties involved in that and on top of that in the Chinese and the Chinese environment, including of course government partners.
Speaker Change: As well so it takes a bit of time the relationship is really good and we mentioned in the release or in active discussions with the partners on how to continue and run this business going forward.
Tobias Hestler: So it just takes a bit of time. But the relationship is really good. And we mentioned the release. We're in active discussions with the partners on how to continue and run this business going forward and to enable the inclusion of those. We've just agreed now to extend it, so we're not up against a very hard deadline. The discussions are really positive. I think all the parties are aligned on the value of the joint venture and the collaboration. So they're all pulling in one direction. And, you know, as you would expect, we would update you then as soon as we have news on what the future is.
Speaker Change: And to enable the inclusion of those we've just agreed now to extend it so we're not up against.
Speaker Change: Very hot Hot deadline that the discussions are really positive I think all the parties are aligned on.
Speaker Change: The value of the joint venture and on the collaborations that are all pulling in one direction and as you would expect we would update you then as soon as we have news on about the future.
Speaker Change: Tourism.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Chris pitcher of Redburn Atlantic Chris Your line is now open.
Unknown Executive: Thanks very much. And in advance, apologies. I have technical issues. I haven't listened to the presentation. I've read through the pages, so apologies if I've covered...
Chris Pitcher: Thanks very much.
Chris Pitcher: So probably not technically if you listened to the presentation I'll hop rent through the pages. So of course, it's not.
Speaker Change: Good evening.
Speaker Change: In terms of the general consumer environment.
Ross: Ross Your brands are you seeing any evidence.
Speaker Change: Soft demand across some of your more discretionary brands I mean, one brand performance Liberty Smile to me in this environment the strong growth in centrum double digit growth.
Speaker Change: Are you able to give us a bit more detail on where the central growth is coming from your you've launched in a lot of new markets. How much of that is sort of new market driven growth how much is sort of like for like growth across your existing sales pace. Thanks very much.
Unknown Executive: Thanks for the question, Chris. Listen, so specifically on Centrum, we feel really good about the performance there, and it's a combination of two things. As you said, we announced we launched a few new markets, like India, Egypt, and some other markets. At this point, it's still early in those markets. It's doing well, those launches, but probably not having a significant material impact on the overall growth of the business yet. We're quite optimistic it will down the road.
Speaker Change: Yeah.
Speaker Change: Thanks for the question Chris.
So specifically on central we feel really good about the performance there and it is a it's a combination of two things as you said, we announced we launched a few new markets like India.
Speaker Change: Asia and some other markets.
Speaker Change: At this point, it's still early in those markets is doing well those launch it but probably not having a significant material impact on the overall growth of the business yet we're quite optimistic it will down the road I think the big driver of the Central growth is something we've talked about which is this cosmos study that we completed in that.
Unknown Executive: I think the big driver of Centrum growth is something we've talked about, which is this Cosmos study that we completed, and now we have just had the third readout of the study in partnership with Harvard Business School that showed that centrum silver, which for instance, in the U.S., is about 50 percent of our business targeted towards older men and women, improves cognitive function by 50-60 percent if it is taken daily. So as a result of that, we've really seen strong take-up behind that claim, and we think this is a big opportunity.
Speaker Change: Now have just had the third readout of the study in partnership with Harvard Business School, They showed that centrum silver.
Speaker Change: For instance in the U S is about 50% of our business targeted towards older.
Speaker Change: Men and women.
Speaker Change: Improved cognitive function by 50, 60% Incent from silver has taken daily so as a result of that we really see strong take up behind that claim and we think this is a big opportunity.
Unknown Executive: It's a big opportunity for us to continue to drive those kind of scientific claims behind a category that does tend to have less science. I'd say that's the big driver behind our BMS and Centrum groups.
Speaker Change: It's a big opportunity for for Us to continue to drive those kind of science and the claims behind the category and it does have tend to have less science I'd say, that's the big driver between.
Speaker Change: Behind our Vms and centrum growth.
Speaker Change: Yeah.
Unknown Executive: Could I just clarify, did you say 5-0, the US business is silver, or 1-5?
Speaker Change: Can I just heard you say five zero businesses silver or one 5%.
Speaker Change: Is it.
Unknown Executive: Oh, 5-0. I'm sorry. I'm sorry, Chris. I didn't hear you. You broke up. Yeah, Centrum Silver is the U.S. 50% of our business.
Speaker Change: I'm, sorry, I'm, sorry, Chris I didn't I didn't hear you broke up yes et cetera.
Unknown Executive: 50% of our business. Yeah.
Chris Pitcher: 50% of our business yeah, great. Thanks very much.
Chris Pitcher: Thank you.
Chris Pitcher: Okay.
Operator: Our next question comes from David Hayes of Jefferies. David, your line is now open.
Speaker Change: Our next question comes from David Hayes with Jefferies. David Your line is now open.
David Hayes: Thank you. Good morning also a two for me just on the oral care, obviously impressive growth continuing but.
David Hayes: continuing, but we assume some of that's driven by the rollout of the whitening range, the new whitening range. I just wonder whether there's any kind of way of quantifying that at all.
But we've seen some of that is driven by the rollout of the widening range of new widening range I just wonder if there's any kind of way of quantifying that I guess, we're thinking more about thinking the comping effect next year just to get a sense of the benefit in terms of channel pipe fill.
David Hayes: I guess we're thinking more about the comping effect next year, just to get a sense of the benefit in terms of channel pipe fill. And then secondly, on the share buyback shift to go into the market, just to kind of check that that we assume is completely independent of any Pfizer plans. You're not kind of indicating that you don't think they're going to sell down again this year. But I guess if they did sell down again this year, is it still within your options that you would then participate in that rather than continuing to buy through the rest of the year? Thank you so much.
Speaker Change: And then secondly on the share buyback shift to.
Speaker Change: So going into the market just to kind of shape that we achieve is completely independent of any size of plans.
Speaker Change: Kind of indicating that they've got a sell down again this year, but I guess, if they did sell down again this year as it is it still within the <unk>.
Speaker Change: And does that you would then participate in that rather than continuing to probably through the rest of the year. Thank you so much.
Tobias Hestler: Thanks, David. Let me take the share buyback question, then Brian will come on the oral care one. So look, on the share buyback, it's not a shift, right? I think it's ultimately what you would expect a company to have that has a share buyback program is a program that buys it back on an open line. This is a muscle we still need to build. We have never done that, right? So I think we have now put the machine in place, and we need to learn that muscle, how to operate and run that. And I think it's something that's totally normal.
Speaker Change: Thanks, David Let me take the share buyback question and Brian.
Speaker Change: I will come on the on the oral care one so so look on the share buyback. It's another ship right I think it's ultimately what you expect would you expect the company to have that has a share buyback program is a program that buys it back on an open line.
Speaker Change: This is a muscle that we still need to build we have never done that right. So I think we now put the machine in place and we need to learn that muscle of how to operate and run the AD than anything it's something that's totally normal.
Tobias Hestler: And that opens up just three avenues to do it across all the three avenues that are available to share buybacks. One is on the open market. Secondly, buying it back directly from Pfizer at a given discount. And then thirdly, of course, participating in a placement.
Speaker Change: And that opens up just haven't used to do it across all the three avenues that are available to do share buybacks bought it on the open market secondly, buying it back back directly from Pfizer.
Speaker Change: At a given discount and then thirdly of course participating and are placing and for US. It's just all the optionality.
Tobias Hestler: And for us, it's just all the optionalities. And also, I think you saw in the stock exchange announcement, I think it says up to 185 million. So I don't think we don't have to buy 185 from the open market. It's just opening up all the three avenues.
Speaker Change: And also I think you saw in the stock exchange announcement, I think it says up to $185 million. So I don't think we don't have to buy 185 from the open market. It's just opening up all the three avenues. That's all that's all.
Speaker Change: That is our optionality for us.
Speaker Change: Ensuring we can complete the 500 million share buyback by the end of this year.
Brian McNamara: David, on oral health. To reaffirm, I am very, very happy with the performance we've seen there and the share growth across all three of our franchises, Denture Care, Paradoxax, and Sensodyne.
David Hayes: David on an oral Hal just.
Brian McNamara: You're right, clinical whitening is doing quite well. Whitening is a really fast-growing category. As I've said in the past, whitening toothpastes tend to be bad for sensitivity. So having a product that's clinically proven, I think we've been able to secure dental recommendations behind this. They typically don't recommend whitening toothpaste.
David Hayes: To reaffirm very very happy with the performance we've seen there in the share growth across all three of our franchises are denture care paradigm attacks and Pennsylvania right clinical why is doing quite well whitening is a really fast growing category as I've said in the past whitening toothpaste is tend to be not good for sensitivity.
David Hayes: So having a product that is clinically proven I think we've been able to secure dental recommendations behind that they typically don't rent recommend whitening toothpaste.
Brian McNamara: But listen, every year, we come out with a big innovation in the Sensodyne franchise. Last year, it was Pro-enamel, active enamel repair. A few years ago, it was sensitivity plus gum. It was rapid. So every year, we have a big launch at the beginning of the year and other launches throughout the markets. We'll continue to see that trend as we go forward. I also think clinical white is a...
David Hayes: But listen every year, we come out with a big innovation centered on our franchise last year with pro enamel active enamel repair.
Beers back it with a sensitivity plus gum. It was rapid so every year, we have a big launch in the beginning of the year and other launches throughout the markets will continue to see that trend as we go forward.
David Hayes: I also think clinical way.
David Hayes: A product that will drive growth in year two year three of launch we think I have long term potential so I wouldn't necessarily quantify the pipeline or what it looks like just know that this is our model. We have big launches every year is successful and we follow them up the following.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Thank you so much. Our next question comes from Rashad Kawan of Morgan Stanley. Rashad, your line is now open.
Speaker Change: Thank you so much on next question comes from Richard column of Morgan Stanley.
Richard: Richard Your line is now open.
Rashad Kawan: Hey, good morning, guys. Thanks for taking my questions. Just two for me, please.
Richard column: Hey, good morning, guys. Thanks for taking my questions just two for me please.
Rashad Kawan: First one, can you update us on what you're seeing in China? You said it was flat in the first half, obviously tough cold and flu come, of course, but what was the performance pre-cold and flu? And obviously, it's been a tough backdrop across the board there. What are you seeing in terms of consumption across your categories? Second question, on running down your oral phenylephrine stock. Obviously, the FDA hasn't made a formal decision on that yet. So I'd just curious as to how you think about these decisions, what drives you to take action at this point in time? Thank you.
Richard column: First one can you update us on what Youre seeing in China.
Richard column: You said it was flat in the first half, obviously tough cold and flu comps of course, but what was the performance ex cold and flu.
Speaker Change: Obviously, it's been a tough backdrop across the board a fair what are you seeing in terms of consumption across your categories second question on running down your oral phenylephrine stock obviously, the FDA hasn't made a formal decision. There. So just curious as to how you think about these decisions what drives you to take action at this point in time. Thank you.
Richard column: Yeah.
Tobias Hestler: Thanks, Rashad. So, I think like last year, China was up over 20%. This year, it's flat.
Speaker Change: Thanks, Richard So let me do China. So I think look last year, China was up over 20% this year it's flat.
Speaker Change: And it was up 20% last year due to the pretty much dependent defended upside so doing flat on top of the 20 I think is a really really strong performance. So I think it just means that the rest of the portfolio is doing really really well for us. So I think overall the business has really grown through offended because they've also.
Speaker Change: Back on thin bid actually very pleased with what we've done on intended.
Tobias Hestler: And it was up 20% last year due to the pretty much defended, defended upside. So doing it flat on top of the 20, I think is a really, really strong performance. So I think it just means that the rest of the portfolio is doing really, really well for us. So I think overall, the business has really grown through Fendit. You can also step back on Fendit. Actually, I'm very pleased with what we did on Fendit in China. We were able to retain quite a bit of the consumers that came into the category due to COVID.
Tobias Hestler: So sort of the brand is now quite a bit bigger than it was pre-COVID in China. So from that point of view, also on Fendit, even you have the role of also if you take sort of a three or four year look at it, also, also good.
Speaker Change: China.
Speaker Change: We were able to retain quite a bit of the consumers that came into the category of COVID-19.
Speaker Change: So the brand is now quite a bit bigger than it was pre COVID-19.
Speaker Change: Over in China. So from that point of view also extend that even you have to roll them. All so you could take sort of a three or four years look at it.
Speaker Change: Also also good so look we feel good about China really good growth.
Speaker Change: And the EMS business in the oral care business and also a bit of basic back oral care was a bit weaker in the first half of last year too, but still overall good performance and I think it goes back to.
Tobias Hestler: So look, feel good about China, really good growth in the VMS business, in the oral care business, and also some basic oral care was a bit weaker in the first half of last year, too, but still overall, good performance. And I think it goes back to our brands, right? These are healthcare brands, right? I think we are not really that directly exposed to the economic health of the market and the business. So I think we should
Speaker Change: Our brands right. These are health care brands right I think we are sort of not that directly exposed to.
Speaker Change: Through the economic health of the market and the business. So I think it speaks to the defensive nature of the brands that that resetting so.
Unknown Executive: Yeah, let me jump on the, thanks Rashad, on the phenylephrine question. Yes, we did make the decision to kind of take down our inventory of phenylephrine and launch products for the cold season, not including phenylephrine. The FDA didn't make that decision. As you know, there was a 14 to 0 recommendation to the FDA from an advisory committee that phenylephrine wasn't efficacious but, obviously, is still safe. You know, we stand behind the efficacy of phenylephrine, but we worked with our retail partners to do this in a way that allows us to ensure that we will have the products on the shelf for the cold and flu season.
Speaker Change: Let me, let me jump on the extra shot on this kind of last one question, yes, we did make the decision to kind of.
Speaker Change: Take down our inventory in federal that friend and launch products protocol cold season, not including the FDA didn't make that decision as you know there was a 14th zero recommendation to the FDA from Advisory committee that kind of lift from wasn't efficacious.
Speaker Change: But obviously it is still safe.
Speaker Change: We stand behind the efficacy of pennant last time, but we worked with our retail partners to do this in a way that allows us to ensure that we will have the products on the shelf for the cold and flu season. Our main focus was to make sure that we can deliver for the cold and flu season that consumers could.
Unknown Executive: Our main focus was to make sure that we could deliver for the cold and flu season, that consumers would have the products available to use, and we're not sure when the FDA will make that decision and what the outcome of that decision will be, when the products would need to be delivered.
What have the products available to us and we're not sure when the FDA will make that decision and what the outcome of that decision will be when the products would need to be phased out I moved off the shelf. So we decided to get proactively ahead of that to ensure we can continue to supply.
Speaker Change: Thank you very much.
Operator: Our next question comes from Jeremy Fialka of HSBC. Jeremy, your line is now open.
Jeremy <unk>: Our next question comes from Jeremy <unk>.
Jeremy <unk>: <unk> B C. Jeremy Your line is now open.
Jeremy <unk>: Hi morning, Thanks for taking the questions.
Jeremy <unk>: From the first one is on pricing I think you didn't apply that obviously pricing was a step down.
Jeremy Fialka: I think you implied that obviously the price was going to step down from Q1 to Q2, which indeed is what we have seen. But then actually, from kind of here on out, it's a relatively stable picture with the price rises roughly offsetting the carryover effect. So just wanted to point that out.
Speaker Change: Q1, Q2, which indeed is what we have seen.
Speaker Change: But then actually from kind of here on out.
Speaker Change: Relatively stable picture with the did you price rises roughly offsetting the carryover effects.
Speaker Change: Just what is it that that is still the message and then secondly, if you could talk about.
Speaker Change: Bolt on M&A is that something which you said you.
Speaker Change: A key to do them.
Speaker Change: How do you see what the market for the sort of mid sized transactions is at the moment, whether you think that could be a little bit more movement type, becoming say six to 12 months. Thanks.
Unknown Executive: Thanks, Jeremy. I'll start with the bolt-on question, and then Tobias will talk about pricing.
Thanks, Jeremy I'll start with the bolt on question then to be a small talk the pricing just to get grounded on what we said in the past, which is first of all we love the portfolio. We have we don't believe we need to do anything with the portfolio to deliver on our our guidance that we've given but that said we want to proactively actively.
Unknown Executive: You know, just to get a grounding on what we said in the past, which is, first of all, we love the portfolio we have. We don't believe we need to do anything with the portfolio to deliver on the guidance that we've given. But that said, we want to proactively and actively manage the portfolio. As a result, you saw the three divestments that we did. We did those things because we felt like we generated more.
Speaker Change: Manage the portfolio and as a result, you saw the three divestments that we did we did does because we felt like we generated more shareholder value and divesting that in keeping and we will continue to proactively manage that portfolio bolt on M&A is clearly something we are actively and we'll actively look at it's in our capital.
Our allocation priorities invest in growth want to bolt on M&A three return cash to shareholders. So I won't make any specific comments on what we're doing but obviously, if something strategically makes sense and it creates value for the business will vary.
Speaker Change: To doing that.
Tobias Hestler: And on your price question, Jeremy, yeah, you got that I think exactly right. It's exactly what we expected. The step-down was predominantly in EMEA LATAM, and that is all driven by the rollover because most of the pricing negotiations across Europe are done in Q1, so in Q1, you still see the impact from the previous year. In Q2, you see the new pricing that was agreed. But it's really EMEA, the Euro pricing. So as you said, step-down to Q2 and then much more stable throughout the rest of the year.
Speaker Change: And on your on your price, but Jeremy Yes, you got that I think you're exactly right. That's exactly what we expected to step down was predominantly in EMEA.
Speaker Change: In EMEA Latam and that is all driven by the roll over it because most of the pricing negotiations across across Europe are done in Q1. So in Q1, you still see to impact from prior year. In Q2, you see the new pricing that was agreed so I think the step down is really the expected one from how the pricing works its not a change.
And how we're dealing with our.
Speaker Change: With our customers.
Speaker Change: And I think in the other regions. It's much more stable of course in the U S. You have pricing taken at different times of the year, so that might be a little bit more spiking.
Speaker Change: Up and down depending on who you're cycling over a year.
Speaker Change: Didn't take the credit the increase or over in your debt, but it's really the EMEA.
Speaker Change: The euro pricing, so and as you said.
Speaker Change: Step downs of acute through Q2, and then much more stable throughout the rest of the year.
Speaker Change: Sure.
Speaker Change: Okay. Thanks.
Speaker Change: Yeah.
Operator: Our next question comes from Oliver Nicolai of Goldman Sachs.
Speaker Change: Our next question comes from one of our Nicolai of Goldman Sachs.
Nicolai: Hi, good morning, Brian to be a first question on net debt to EBITDA, which is a which is below $2 nine times now so big achievements today, but both the disposals of.
Speaker Change: He and good things are stronger it'd be cool feature.
Speaker Change: I assume that you could reach your two and a half times midterm guidance sooner.
Speaker Change: And then is there more disposals to come.
Speaker Change: The first question and secondly on the just want to highlight obviously very strong gross margin expansion on an H 150 basis.
Speaker Change: How much of it is linked to lower input costs that you said productivity gains.
Do you see any benefits yet from the immediate head closer to kick in and I guess more broadly.
Speaker Change: Since you have achieve really good top line growth.
Speaker Change: Since the 2022.
Speaker Change: That's a bit more focus on margin probation since you asked it a bit below peers. Thank you.
Tobias Hestler: Thanks, Olivier. So look, I mean, on net debt down to 2.9, it's really strong. Also, I mean, we returned 700 million to shareholders in half one as part of that. Part of that was supported by the Jafstig proceeds, but also by, I think, very, very strong crash flows that have come through.
Olivier: Good thanks, Thanks Olivier.
Speaker Change: On net debt down to two nine as really strong also I mean, we returned 700 million to show how those in half one as part of that.
Speaker Change: So that was supported by the Chesapeake proceeds, but also by being very very strong cash flows that.
Speaker Change: It's true it's true at the end of the year, we're going to get the proceeds from the <unk>.
Speaker Change: The smokers a diverse but also I think up for you then roll. This forward into 'twenty five is also going to take.
Tobias Hestler: It's true, at the end of the year, we're going to get the proceeds from the smokers divestment, but also, I think, look, you then roll this forward into 25, it's also going to take EBITDA out, right? So the impact on, while it brings in cash, which is helpful, the impact on leverage is, of course, much, much, much, much smaller. Look, we're confident in our medium-term guidance range, which we said was around 2.5, and we're working towards that.
Speaker Change: EBITDA out right. So the impact on why it brings the cash investment, which is which is helpful. The impact on leverage.
Speaker Change: Is of course much much much much smaller look we're confident on our medium term guidance range, but we sat around $2 five and we're working towards that.
Tobias Hestler: And then, of course, look, the net debt formula reacts very, very strongly to short-term FX movements as well. So it's very hard to predict, you know, a spot landing. This is a little bit like landing a 747 on an aircraft carrier.
Speaker Change: And then of course not.
Speaker Change: Net debt.
Speaker Change: The net debt Paul Miller reacts very very big too short term FX movement as well so it's very hard to predict a.
Speaker Change: Spot landing is this a little bit like landing.
Speaker Change: 747 on the aircraft carrier so it's hard to give you David and good.
Tobias Hestler: So it's hard to give you that. But, I mean, if you take a step back, it's a highly cash-generated business. We've been very clear on our capital allocation priorities and the building blocks for that.
Speaker Change: Take a step back as a highly cash generative business, we've been very clear on our capital allocation priorities and the building blocks for that so I think that that is coming.
Speaker Change: Down.
Speaker Change: Over time, though.
Tobias Hestler: So I think the debt is coming down over time. On your gross margin question, so I think we've seen, of course, I mean, you look at half-one. So clearly, there's still, you know, the help from pricing because pricing was with the rollover a bit higher in half-one. Some of that reduces slightly in the second half of the year, given the rollover from Q1 that I should have talked about in the prior question. Then what we're seeing is easing inflation. So there is still inflation, but it's in material costs. I mean, the first few materials are now, I think, actually getting into deflation.
Speaker Change: On your gross margin question. So I think we've seen of course I mean, if you look at half one so clearly there is still.
Speaker Change: The help from pricing because pricing was but the roll over a bit higher in half bonds. Some of that that we're used to slightly in the in the second half of the year given the the rollover from Q1 that I sort of talked about in the prior question than what we're seeing is.
Brian: Easing inflation, so there is still inflation, but its Brian.
Speaker Change: On material costs I mean, there is the first few materials are now actually getting into deflation, but then we have labor costs to cover because I think a lot of our cost of goods are tied to either our own labor or then the labor of our contract manufacturers because I think that our conversion is it's very much labor intensive.
Tobias Hestler: But then we have labor costs to cover, because I think a lot of our cost of goods is tied to either our own labor or then the labor of our contract manufacturers because I think our conversion is very labor-intensive. It's less exposed to material costs. So that's clearly easing compared to last year, but we're also seeing efficiency improvements as we bring up our operating efficiencies in the sites. And I think that helps offset, and I think all these factors together.
Speaker Change: It is less exposed to the to the to.
Speaker Change: Material costs, so, but that's clearly easier compare it to.
Speaker Change: Two two last year, but we'll also see efficiencies improvement as we bring up our operating efficiencies in the in the science and I think that helps offset and I think all these factors together.
Tobias Hestler: And there's a bit of freight cost as well. Last year, we shipped a lot of air freight because we had this unexpected spike in demand, so that was also a bit of help there. But your maidenhead question, not yet.
Speaker Change: And that's been a freight cost as well last year, we shipped a lot of airfreight, because we had the unexpected spike in demand.
Speaker Change: That was also a bit of help there you are making that question not yet I think it takes time to shift production. So I think these impacts are.
Tobias Hestler: I think it takes time to shift production, so I think these impacts are, the positive impacts are further out. We haven't shut down the site yet. We announced that we would do that. So these are usually two-ish year processes to happen. And as we shift production, you're going to see the benefits come through over time as production moves across.
Speaker Change: Positive impacts of photo I'd be haven't shutdown decided yesterday, we announced that we will we will do that so ease of use relate to.
Speaker Change: <unk> processes to happen in the as we shift production, you're going to see to see the benefits come through.
Speaker Change: Over time, that's the production to move some moves across them.
Speaker Change: Thanks.
Speaker Change: Ya.
Speaker Change: Yeah.
Operator: As a reminder, if you would like to raise a question, please press star followed by one on your telephone keypad. And to remove yourself from that line of questioning, please press star followed by two. Our next question comes from Celine Pannuti of J.P. Morgan. Your line is now open.
Speaker Change: As a reminder, if you would like to raise a question. Please press star followed by one I guess kind of funky Pat I'm wondering if that's something that line of questioning Please press star two.
Speaker Change: Our next question comes from screen penalty of J P. Morgan.
Your line is now open.
Sean Naughton: Thank you good morning, everyone.
Sven Goldfinger: I have one question on margin in the U S, which was down 175 basis points reported.
Celine Pannuti: 175 business points reported. Can you flesh out, you said that higher ANP, you know, maybe a category or whatever, why that was quite a drop? And did I understand correctly that you said that last year, H2 margin was a tax credit. So this year, we are facing that plus further ANP. So are we expecting US margin to be down several hundred business points for the year? Thank you. Yeah, thanks for that.
Can you flesh out you said that's higher A&P.
Sven Goldfinger:
Maybe a category with a Y that's what's quite.
Speaker Change #102: Dropped and did I understand correctly that you said, that's less to H two martina to tax credits. So this year, we are facing that plus further A&P. So are we expecting U S market to be down several hundred basis points for the year. Thank you.
Unknown Executive: Yeah, thanks. Thanks, Celine.
Speaker Change #102: Yes. Thanks.
Speaker Change #104: So, yes think U S margin was down I think.
Speaker Change #104: It's a factor off.
Speaker Change #106: I think of several points one of course.
Speaker Change #106: The volume decline in the.
Speaker Change #106: Market given the sell in and also the stock.
Speaker Change #106: The inventory or the retailer destocking, so I think that for us the.
Speaker Change #106: Volume.
Speaker Change #106: Declining volume environment that at least some marks on the on the gross margin side.
Unknown Executive: So yes, I think the US margin was down. I think it's a factor of, I think, several points. One, of course, the volume decline in the market given the sell-in and also the stock in the inventory or the retailer's de-stocking. So I think that, of course, if you're in a volume environment, if you're in a declining volume environment, that leaves some marks on the gross margin side. And, of course, that is very hard to offset by the deficiencies that the team, of course, is still running.
Speaker Change #106: And of course that is very hard to offset with efficiencies that the team of courses.
Speaker Change #106: It is still running.
Speaker Change #106: And then secondly, it's really I think most importantly is to step up the step up in A&P in the investments, we're making into the market you saw and maybe <unk> seen in my slides to sell out right mid single digit sell out growth.
Speaker Change #106: And look I'd say it's.
Speaker Change #106: The overall environment the U S market overall is still in a slight volume decline right. So.
Unknown Executive: And then secondly, it's really, I think, most importantly, the step up, the step up in A&P and the investments we're making into the market. You see, and maybe you've seen in my slides, the sell-out, right, mid-single digit sell-out growth. And look, it's, it's, you know, the overall environment. The US market overall is still in a slight volume decline So, and we've been gaining volume, so we have to work for that.
Brian: <unk> volume so we have to work for that plus I think Brian mentioned earlier also I think the launches we've done into support we put behind the sense of dine in so of course, we slipped behind the Centrum Centrum claims.
Speaker Change #107: <unk> also launched a <unk> extension. So I think there is strong support to deliver to our continued growth.
Speaker Change #108: In the market overall, there I know, perhaps who were not guiding on on a segment on segment margin, but you should expect us to continue to invest in the U S as well.
Unknown Executive: Plus, as Brian mentioned earlier, I think the launches we've done and the support we put behind Sensodyne, the support we put behind Centrum, the Centrum claims, we've also launched Benefiber extension. So I think there is strong support to deliver continued growth in the market overall. And look, perhaps we're not guiding on segment margin, but you should expect us to continue to invest in the US as well. And also, on top of that, behind Ericsson's launch later this year.
Speaker Change #108: Also on top of that.
Speaker Change #108: Ericsson launch.
Speaker Change #108: Later this year.
Speaker Change #108: Yeah.
Speaker Change #108: <unk>.
Operator: Our next question comes from Iain Simpson of Barclays. Iain, your line is now open.
Speaker Change #109: Our next question comes from Ian Simpson Barclays and your line is now open.
Iain Simpson: Thank you. Thank you very much for allowing me a follow-up. I just wondered if we could sort of briefly touch on some of the items between EBIT and EPS, because certainly, historically, there's been pretty good EBIT and above delivery, but EPS has not done an awful lot in the last year or two.
Speaker Change #110: Thank you. Thank you very much for allowing me a follow up.
Speaker Change #111: Wondered if we could sort of briefly touch on some of the oceans between EBITDA and EPS because suddenly historically, there's been pretty good at that and above delivery, but EPS is no no no.
Speaker Change #111: <unk> done an awful lot of them.
Speaker Change #113: Last in the last year or shape.
Speaker Change #114: So as we kind of think through 325 I guess.
Speaker Change #115: You've you've told you we had so finance costs come down a little bit this year.
Speaker Change #116: Presumably we'll get continued benefit there from deleverage nothing where it's happening to tax rate and unless youre going to tell me otherwise on share count presumably comes down as well.
Speaker Change #117: I'm just trying to think about how comfortably conveyed at that 6% EPS growth that you did an H 124.
Speaker Change #118: We all know kind of in a place running forwards epic growth translates to EPS, great. Thanks very much.
Unknown Executive: Thanks, thanks, Iain. So look, yes, net finance costs should, you know, continue to come down as our net debt goes down. I think you've seen that very much come through in half one, where net finance costs were 11% lower than a year ago. So I think that's absolutely happening.
Speaker Change #118: Thanks, Thanks, Ian So so look yes, net finance cost.
Speaker Change #119: Continue to come down.
Speaker Change #120: As a as our net debt goes down I think you've seen that very much come through in half one Brent net finance costs were 11% lower than a year ago. So I think that's absolutely happening on the adjusted tax rate. We're bang on in the middle of the guidance range. We've given the early in the year already on 24 to 25, so I think that.
Unknown Executive: On the adjusted tax rate, we're bang on in the middle of the guidance range we gave early in the year, already on 24 to 25. So I think that I think is, I think, I believe we're here absolutely in the right range. Of course, there are still, you know, pluses and minuses to that as pillar two laws are enacted around the world. So I think there, you know, that eases that, you know, but it's within this range, but plus or minus 50 bits. Let's see where we get to and, but I am very confident that the right range. Then, let me mention one of the things you didn't mention, which is the non-controlling interest.
Speaker Change #121: I think as I think I believe you are absolutely in the right range of course, Theres still pluses and minuses on that at all.
Speaker Change #121: Pillar two.
Speaker Change #121: Laws are enacted around the world. So I think there that could easily that is within this range plus or minus 50 bps, let's see barbie or we get sue on the but I think very confident that's the right range. Then let me mentioned monitor things you didn't mention which is the noncontrolling interest.
Unknown Executive: Those were very much higher last year, given the defendant's bike, then it sits in the joint venture part. So it was a much higher non-minority interest that's normalized now. So what we have in half one is actually a pretty good run rate for the rest of the year. So, probably you should take a look at half one as a, you know, we'll say it's pretty balanced between half one and half two, what to expect on that line.
Speaker Change #121: We're very much higher last year, given the defendant Spike bend it sit in the joint venture part. So it was much higher non minority interest that's normalized now so what we have in half one is actually a pretty good run rate for the rest of the year. So.
Speaker Change #121: So probably you should take a look at half one.
Speaker Change #121: Let's say this is pretty balanced.
Speaker Change #121: In half one and half two once we expect on that line and then yes from the shift from the share buybacks, we're going to get the benefit of the share count coming down which has also which has also been happening.
Unknown Executive: And then, yes, from the share, from the share buybacks, we're going to get the benefit of the share count coming down, which has also, which has also been happening. So all of those, I think, are moving in the right direction and supportive to EPS overall.
Speaker Change #121: All of those I think moving moving.
Speaker Change #121: And in the right direction.
Speaker Change #121: And our support of the EPS overall yeah.
Speaker Change #123: Thank you.
Ian Simpson: Thanks Ian.
Operator: Our next question comes from... Okay, if we take one more question and then come back starting to
Speaker Change #124: An accomplishment.
Ian Simpson: Okay.
Ian Simpson: And then they come back.
Ian Simpson: Yeah.
Ian Simpson: Of course.
Operator: Our next question comes from David Hayes of Jeffreys.
Ian Simpson: Our next question comes from David Hayes with Jefferies.
David Hayes: Hello, I'm going to join the theme of the second question. So just to follow up on the margin question we had earlier on the US and Celine, I think, is there also a one-off cost associated with the switch from FDA-approved products; you would have to buy those products back and effectively write them off? Is that part of the equation in the first half as well, which obviously we wouldn't see in the second half? I don't understand whether that was contributing to the margin performance. Thank you.
David Hayes: Hello, I'm going to join the theme of second question. So just to follow up on the margin question. We had earlier on the U S. So I think.
David Hayes: Is there sort of a one off cost associated with the switch from the FDA reviewed products you'd have to buy those products back into fits what we want them. All is that part of the equation in the first half as well, which obviously we wouldn't see in the second half is what I understand whether that was contributing to the margin.
David Hayes: Mike.
Unknown Executive: Thanks, David. I mean, not material, right? I mean, there might be some packaging material here or there that's left over, right? But I think we really proactively started at the beginning of the year to ramp down our inventory and not repipe them, right? So the big mark in the P&L is from just selling less, of course, higher margin brands into the market that is going to reverse out in the second half of the year.
Mike: Thanks, David I mean, not materially right I mean that might be a packaging material here or there that's left over right, but I think we've really proactively started at the beginning of the year, it's ramped out of inventory and not to re pipe them right. So the big Mark in the P&L is from just selling less of course have higher margin brands into the market that is going to reverse.
Unknown Executive: I think, you know, the write-offs on that, we're not buying it back, right? So the write-offs should be, you know, not material. Of course, there is always some stuff left here or there, but not in the grand scheme of things that should impact the group margin materially in any way.
Mike: It's out in the second half of the year I think that the write offs on that we're not buying it back right. So the write offs should be.
Mike: B you know not not material of course always some some stuff that here or there but not.
Mike: Not in the Grand scheme of things that should impact the group margin materially in any way.
Brian McNamara: Thanks for that. Back to Brian. Yeah, super. So listen, thanks, everyone, for joining us today.
Dan: Great. Thanks for that Bryan Dan.
Yes, Super so listen thanks, everyone for joining us today as you can see from the results. Our model is delivering we feel really good about our first half do less sanya and they already know if you have any further questions, but before we leave the call I'd like to express a big Thank you on yet.
Brian McNamara: Thanks, everyone, for joining us today. As you can see from the results, our model is delivering. We feel really good about our first half.
Brian McNamara: Do let Sonya and the R&T team know if you have any further questions. But before we leave the call, I'd like to express a big thank you to Sonya. Today will be her last Haleon investor call, and it's been an absolute pleasure working with Sonya these last four and a half years. I'm forever grateful for all she did to help in the creation of Haleon. She's had a huge impact. I wish her well in her new life at Diageo, and just want to say a big thank you, Sonya, and well done. And I wish you well.
Dan: Today, we will be here last Haley on Investor call.
Haley: And it's been an absolute pleasure working with signing these last four and a half years I'm forever Grateful for all he did to help and the creation of early on.
Speaker Change #128: He has had a huge impact I wish her well in her new life at the ICL.
Speaker Change #129: And just want to say a big thank you Sonya and well done and wish you well.
Speaker Change #129: Okay everyone.
Speaker Change #129: If you have any further questions you can reach out to the IR team and have a great rest of the summer.
Operator: This concludes today's call. Thank you to everyone for joining us. You may have disconnected your lines.
Speaker Change #131: This concludes today's call. Thank you everyone for joining you may now disconnect your lines.
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